Elements of the Energy Revolution

There is not a single answer to the complex problems of our energy supply. Both the urgent short term problem of providing adequate supplies of liquid fuels for our transportation vehicles and the longer term problems of transitioning to permanent alternative energy sources must be addressed in a single comprehensive energy policy.  This post will provide an overview of the required transportation fuels policy.  The next post will introduce the elements of the long term solutions.  All of the elements will be addressed in more detail in future posts.

Elements of an energy policy that are urgently needed to increase our supply of liquid fuels are¹:

Increased federal fuel efficiency standards

Incentives to accelerate production and sale of hybrid vehicles.

Providing an environment in which the use of diesel powered vehicles will be made more attractive

Encouragement of a coal liquefaction industry in the US

Encouragement of development of unconventional sources of energy such as a gas to liquids policy and encouragement of enhanced oil recovery and production from heavy oil resources.

Increased emphasis on producing more ethanol and bio-diesel.²

None of these items require significant technological development.  What they need is legislation that requires new standards, incentives for adoption and large scale demonstration of the technologies.

Transportation Concerns - The transportation sector consumes 67% of the petroleum products in the US and even higher percentages in some other countries.  The US has very tight supplies of gasoline and diesel as evidenced by their high prices compared to what we have been accustomed to.  Demand for these products is increasing rapidly and there is every indication that demand will outstrip supply in the near future – two years if the more pessimistic forecasts are correct or 10-20 years if the optimistic forecasts are correct.  Neither of these extremes is long enough to permit a casual implementation of an energy policy.  Traditionally most of the gasoline that we use is made in refineries in the US, the Virgin Islands, Venezuela, Canada and Western Europe.  We have become increasingly dependent on Western Europe for gasoline, which will only continue as long as they have a surplus.  Traditionally the Persian Gulf countries have been able to provide quantities that we have not been able to obtain from the Atlantic coastal countries, but they may not be able to fill this role much longer. These supplies are going to become less dependable and more costly as competition for liquid fuels heats up due the requirements of Asia

Fuel Efficiency Standards were demonstrated to be effective in reducing fuel consumption during the oil crises of 1979-82.  It is necessary to increase fuel efficiency standards now, which would encourage faster adaptation of hybrid vehicles.  However higher mileage requirements alone are not sufficient mitigation in itself as our conventional fuel supplies will decline rapidly when peak oil arrives. 

Hybrid Vehicles - In addition to increased fuel efficiency standards the government must, at a minimum, extend the current level of tax credits. Higher incentives would encourage the rapid adaptation of this, still new to the public, technology.  Transitioning a fleet to a new generation of vehicles is normally a rather slow process, taking 9 to 15 years, Hirsch, p4, and this must be shortened to be sure that it has occurred before peak oil occurs.  Increased public awareness to the performance advantages and that they use well proven technology must be made. 

Diesel powered vehicles can consume up to 30% less fuel than gasoline powered vehicles.  Europe has long used diesel powered cars to a much greater extent than the US. Currently US standards for diesel fuel result in emissions that are high in sulfur; this will change in 2006 with standards that will reduce both SOx and particulate emissions. Even lower sulfur content may be required to meet the objections of environmentalists. GTL liquids and bio-diesel fuel are extremely low in sulfur and reduce both sulfur and particulates to well below acceptable standards. Improved fuels combined with continued development of quieter light weight diesel engines for cars and light trucks will encourage Americans to use more diesel powered vehicles. 

Coal Liquefaction Oil and many chemicals can be produced from coal or shale. South Africa depends heavily on this source of energy because it has no domestic oil reserves and it was forced to develop alternative sources while it was embargoed during apartheid.  As well as producing oil, this type of plant will play an important role in producing feed stocks for chemicals when oil becomes extremely expensive.  At current prices of oil (above $50.00/bbl) this technology is competitive.  The lead time for these plants can easily be 10 years.  Large demonstration plants using the first step of this technology i.e. converting coal to syngas are being built as part of the advanced clean coal program.  Full size demonstration plants which combine the GTL technology (see next paragraph) step with the syngas step and incorporate CO₂ sequestering are urgently needed to give this technology a boost, as it is the only proven technology that can supply all of our needs for liquid fuels. We need demonstration plants that use proven technology and we must not wait for improved technology to be incorporated. Improved technology can be incorporated as it becomes available, introducing it prematurely could easily prevent successful operation of the first few plants.  These plants offer the potential of energy independence that would be of huge economic value.

Gas to Liquids (GTL) is a technology that converts natural gas or syngas (synthetic gas, usually made from coal) to liquids. This industry is relatively small, but increasing quite rapidly. GTL is especially suitable as an alternate to LNG for transporting it long distances and for small gas reserves (stranded gas) where installing a pipeline would be prohibitively costly. Conventional tankers can be used for transporting GTL instead of expensive LNG tankers and it can be delivered to any port that currently receives tankers. Transporting and unloading GTL liquids is inherently much safer than transporting and unloading LNG. This technology was considered too expensive to compete with conventional oil at low costs of crude, but it is now competitive. Fuels made by this process are cleaner resulting in reduced emissions. Only small pilot plants exist in the US and DOE has a small demonstration plant planned as part of another project. Large commitments to plants in Qatar have been made recently, but even larger facilities are required. It would seem appropriate to have at least one large demonstration plant built in the US with partial funding by DOE. This is the place where new technology can be tried, not in coal liquefaction demonstrations.

Unconventional Energy Sources have a large potential, but it takes a long time to bring new resources into production. Reserves in oil sands or heavy oil deposits are the most common unconventional sources of oil. Development of the oil sands reserves in Canada has been underway for a long time and they are now contributing to Canada's oil production. Several new projects have been started, but they are small in comparison to what is needed. Canadian deposits are very large, larger than Iraq’s conventional oil deposits, which are the second largest reserves in the world. Venezuela has even larger deposits of heavy oil, but development has lagged that of Canada. Several new projects or expansions have been announced in Canada and a single new project announced in Venezuela. Political instability in Venezuela continues to make these resources questionable until this problem is resolved. Most multinational oil companies have not been too interested in developing these deposits, but Chinese and Russian companies are negotiating with Venezuela. These resources are very capital intensive to develop and require that oil prices remain above $50 a barrel to be worthwhile. Any possible encouragement of US companies to participate in this development should be made.

Enhanced Oil Recovery (EOR) can increase the production from an oil well by as much as 30to 60 percent over that what can recovered by conventional or secondary means which are widely used.  Gas, thermal or chemical injection, can be used to stimulate oil flow to produce the fluids that were not recovered during conventional production.  These techniques are not new, but could be used to a much greater extent than they are now.  In addition EOR using new chemicals and microbial injection are in the research stage.  The combination of EOR and CO₂ sequestration (disposal) for emissions recovery is expected to be used increasingly in the next few years.  Increased use of EOR to recover a higher percentage of known reserves will be increasingly important to increases in production.

Bio-fuels, primarily ethanol and bio-diesel, could play an increasingly important part of our future energy supplies.  These are currently produced from corn and soy beans respectively, but theoretically can be made from many types of vegetation.  Making ethanol from cellulosic sources has been proposed.  This is potentially a better way, in that is believed that cellulosic crops can be grown more efficiently and using less land than soybeans or corn.  The conversion of the crops to fuels is more difficult.  Many chemical feed stocks can also be produced from vegetation which will be an increased concern as oil becomes more expensive.  Currently significant subsidies are paid by both federal and state governments for these fuels.  Until these fuels become more competitive with other liquid fuels, which they should be with increased volumes and higher prices for conventional fuels, the crop subsidies that we are currently paying to farmers for other crops should be redirected to subsidize the production of bio-fuel crops.

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1. Hirsch in a very thorough study, Peaking of World Oil Production: Impacts, Mitigation & Risk Management, discuses these items at greater length.  A must reading for those seriously interested in this subject.  The report which came out during my research makes a strong case for moving ahead rapidly on a program to develop our liquid fuel products.

2. I have added bio-fuels to the items recommended by Hirsch based on my belief that they will become cost effective as the price of fuels increase and that their production could be increased more rapidly than many other options.  We must encourage rapid development of this resource.  See Lave for a brief presentation that supports this view.

Comments

[JimO]

You wrote:

Incentives to accelerate production and sale of hybrid vehicles.
Providing an environment in which the use of diesel powered vehicles will be made more attractive
Encouragement of a coal liquefaction industry in the US
Encouragement of development of unconventional sources of energy such as a gas to liquids policy and encouragement of enhanced oil recovery and production from heavy oil resources.
Increased emphasis on producing more ethanol and bio-diesel.2>

But rather than having government subsidize selected technologies as in the above I would rather see government first remove subsidies to existing energy technologies like the oil deletion allowance and then start to tax air pollution. If peak oil concern people they can invest in the 7 year oil futures and can even buy ahead and store fuel (just remember to use a stabilizer). (This may sound impractical but some people already have large heating oil tanks in their homes why not large diesel fuel tanks.) This will drive up the price and improve the ability of alternatives to compete and no need to wait for a corrupt congress that will assuredly act politically rather than wisely.

[Mouseplatterman]

Taking that one step further, why not substantially raise taxes on oil, especially foreign oil?

[karl]

It's activities that are good and bad more then fuels. Activities that can be trivially regulated effectively.

FOr example the incredible delta of change from ten seer, to FOURTEEN, is doing what to the entry level price of a new airconditioner compared to the absurdly marked up weatherstripping etc. most pass on?

The lack of toll charging scanners in our cities, is only possible if the public is denyed all facts concerning there now proven virtues after pre rollout decades of sober analysis does what to 'liquid' fuel wasteful consumption? Just charge people half of what the infrastructure to accomidate there insane vehicles costs and they will abandon them in months. Of course the consumer purchase financing arms of the big three have there lobbyists......

[karl (oops, might misslead on seer14 prices)]

I meant to say the price of seer14 units must now be dropping like a rock as they can't be marketed to only the price insensitive vanity-green buyers.